Fee disputes are a fact of life for the
private lawyer and account for numerous complaints
about lawyers. The bar’s Client Assistance Office
reports that in 2006 it received approximately 130
inquiries that were specifically designated as frictions
over fees. In addition, many complaints that are characterized
by clients as issues of competence, diligence or malpractice
actually stem from concerns about fees.

How to Avoid Fee Disputes
Many misunderstandings over fees could be avoided if
there were a written fee agreement. In recognition
of this fact, ABA Model RPC 1.5(b) requires that "(t)he
scope of the representation and the basis or rate
of the fee and expenses for which the client will
be responsible shall be communicated to the client,
preferably in writing, before or within a reasonable
time after commencing the representation, except
when the lawyer will charge a regularly represented
client on the same basis or rate." Several states
have expanded this mandate and require written fee
agreements.1 Oregon does not require that
fee agreements be reduced to writing other than in
contingent fee cases involving bodily injury, death
or property damage. ORS 20.340.

The importance of a clear written fee
agreement to avoid fee disputes cannot be emphasized
enough. A written agreement can serve as a springboard
for an early and frank discussion about the expectations
and obligations arising from the representation as
well as the costs and fees necessary to accomplish
the client’s goals. Recording this information
may not only prevent misunderstandings about fees and
costs, but also satisfy and clarify the lawyer’s
duties under the rules of professional conduct.

For example, a lawyer may limit the scope
of representation so long as the limitation is reasonable
and the client gives informed consent. Oregon RPC 1.2(b).
Securing a client’s signature on an agreement
that clearly outlines the scope of representation makes
future disagreement more likely to be resolved in the
lawyer’s favor. In addition, RPC 1.4 requires
a lawyer to keep a client reasonably informed about
the status of the client’s case. Clearly outlining
the lawyer’s communication practices (e.g., "Unless
there is an emergency, I normally return phone calls
on Tuesdays and Thursdays") and the timelines
involved in the case (e.g., "It may take six months
for a hearing to be set") may help alleviate clients’ concerns
about periods of silence from their lawyers. Finally,
the most obvious use of a fee agreement is to specify
who the client is. By doing so, lawyers may avoid future
conflict of interest problems.

The fee agreement may delineate not only
the clients’ expectations, but those of the lawyer
as well. A good fee contract should specify not only
how much the lawyer will charge, but also how the client
will be billed and the requirements for payment. In
addition, it may set forth other client duties (e.g.,
remain in contact with the lawyer) and the grounds
upon which a lawyer might withdraw. With such information
clearly set forth in a contract, complaints about improper
withdrawal under RPC 1.16 are less likely to result
in disciplinary investigation, let alone sanction.

Fee disputes may also be avoided by understanding
what fees may and may not be charged to the client.
For example, a lawyer may not charge interest in excess
of the statutory rate without a written fee agreement. In
re Schroeder, 15 DB Rptr 212 (2001). Simply noting
an interest rate on the invoice is not sufficient to
satisfy this requirement, just as unilaterally modifying
a fee agreement is impermissible. See, OSB Formal
Op No 2005-97, and In re Skinner, 14 DB Rptr
38 (2000). Charging a "nonrefundable" fee
and failing to complete the client’s legal matter
is prohibited unless the lawyer refunds the unearned
portion of the fee. See, OSB Formal Op. No.
2005-151; In re Gastineau, 317 Or 545 (1993); In
re Sousa, 323 Or 137 (1996). Charging the same
hours to multiple clients is also improper. OSB Formal
Op No 2005-170. A lawyer may not charge for time spent
responding to a billing dispute or for time spent responding
to a bar complaint. See, In re Benett,
331 Or 270, 278 (2000), and In re Stauffer,
327 Or 44, 64 (1998). In fact, the Oregon Supreme Court
has made clear that any fee charged for work that the
lawyer performed but that was not for the benefit of
the client constitutes a clearly excessive fee. In
re Paulson, 335 Or 436, 440-441 (2003).

How to Resolve Fee Disputes
While working in the Client Assistance Office, I was
surprised to see that some lawyers simply ignore
clients’ concerns about bills. Talking with
a client about these concerns may easily resolve
a dispute. Of course, when a client simply refuses
to pay a bill, lawyers have several options at their
disposal to ensure compensation for their hard work.
For example, lawyers may assert liens over client
files and property. While allowed by ORS 87.430,
asserting a lien over a client file can be fraught
with potential trouble for the lawyer. See,
OSB Formal Op No 2005-90. Even when lawyers follow
the proper procedures in asserting the lien, clients
are apt to complain; the Client Assistance Office
saw 110 complaints in 2006 regarding this issue alone.

As an alternative, some lawyers pursue
charging liens against the judgment or settlement proceeds
or file suit against their clients in circuit courts.
The charging lien in particular can be a powerful and
effective tool to exact payment from the client. However,
both of these options can be expensive and time-consuming.

The comments to ABA Model Rule 1.5 express
a preference for resolving fee disputes through arbitration
or mediation. Most jurisdictions have some type of
sponsored fee dispute resolution program available.
The ABA conducted a survey in 1999 and again in 2006
to find out more about these programs.2 The
ABA 2006 Report on Fee Arbitration included responses
from 35 state jurisdictions and 14 local or county
bars. Only four of these have no fee dispute resolution
program whatsoever. Of the remaining 45, 24 are voluntary
programs and 20 are mandatory programs.

The Oregon State Bar initiated its voluntary
fee arbitration program in 1976. In 2006 the OSB received
83 requests to participate in fee arbitration. When
someone requests arbitration, the opposing parties
are notified and asked to respond regarding whether
or not they to agree to participate. Twenty people
did not respond at all, and 22 declined to participate.
These numbers are perplexing because fee arbitration
is inexpensive ($50 for disputes of less than $5000;
$75 for disputes involving $5000 or more), relatively
quick (three to four months, on average), confidential
and results in a binding award.

Conclusion
Although fee disputes may be inevitable, most can be
either avoided altogether or resolved with relative
ease by following a few simple steps. First, develop
a clear written fee agreement. Pay particular attention
to clarifying ambiguous language. Second, talk with
your client about the terms of the agreement and
make sure it is tailored to the particular case.
Third, bill your client regularly; if a dispute develops,
talk with your client. You may find that a simple
resolution is close at hand. Finally, if you cannot
resolve the dispute between yourselves, consider
among the other alternatives, the OSB Fee Arbitration
Program. You may find it to be a relatively easy,
fast, and cost-effective means to finally get paid.

Endnotes
1. Arizona, Colorado, Connecticut, District of Columbia,
New Jersey, New York, Pennsylvania and Rhode Island
have adopted requirements for written fee agreements
in certain circumstances other than contingent fee
cases.

2. The results of the surveys can
be found at http://www.abanet.org/cpr/clientpro/.

ABOUT THE AUTHORSylvia Stevens is general counsel of the Oregon
State Bar. She can be reached at (503) 620-0222 or
(800) 452-8260, ext. 359, or by e-mail at sstevens@osbar.org.